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Sunland Leasing Company leases a new machine to Carla Vista Corporation. The machine has a cost of $65,000 and fair value of $88,500. Under the
Sunland Leasing Company leases a new machine to Carla Vista Corporation. The machine has a cost of $65,000 and fair value of $88,500. Under the 3-year, non-cancelable contract, Carla Vista will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Sunland expects to earn an 8% return on its investment, and this implicit rate is known by Carla Vista. The annual rentals are payable on each December 31, beginning December 31, 2025. Click here to view factor tables. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decime Date Interest (8%) Revenue/ Expense Reduction of Principal Rent Receipt/ Payment 1/1/25 $ i S 12/31/25 34,340 34.340 27.060 $ Receivable/ Liability 88,500 27,260 61.240 29,441 31.799 12/31/26 4.899 12/31/27 34,340 2.543 31797 Prepare the journal entry at commencement of the lease for Sunland. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation 1/1/25 Lease Receivable Cost of Goods Sold Sales Revenue Inventory Debit 88,500 65,000 Credit 88,500 65,000 Prepare the journal entry at commencement of the lease for Carla Vista. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation 1/1/25 Right-of-Use Asset Lease Liability Debit Credit 88,500 88.500 Prepare the journal entry at commencement of the lease for Carla Vista, assuming (1) Carla Vista does not know Sunland's implicit rate (Carla Vista's incremental borrowing rate is 9%), and (2) Carla Vista incurs initial directs costs of $7,500. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round final answers to O decimal places e.g. 5,275.) Date Account Titles and Explanation 1/1/25 Right-of-Use Asset Lease Liability No Entry Debit 94,748 Credit 94,748
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